If you are an entrepreneur and you’ve been running your business successfully for a few years, you’ll probably be thinking about how you can take it to the next level by growing its value. Whether you are looking to expand your team, move to bigger premises or bring in new equipment and machinery, or you’re simply looking for ways to grow your profitability, there are many different issues to consider.

At Grosvenor Wealth Management, we work with accountants and other professionals to offer business owners the advice they need to grow their companies. These are some of the most common questions our clients ask us about growing their businesses.

Growing your business

How do I know if it’s the right time to grow?

Monitor your cashflow

One of the key areas to watch when you are considering business growth is your cashflow. Maintaining a healthy cashflow can be one of your biggest challenges as a business owner and growing the business could have a negative effect on it – for example through an increase in salaries, rent, marketing or equipment costs.

If you own a seasonal business, you’ll also need to make sure you have enough to cover overheads, stock levels and regular fixed and variable costs during the slower periods. By regularly reviewing your cashflow and working out where any problems are you can cover them as you grow.

Develop a realistic business plan

This is a new period in your company’s life, so you need a new business plan that sets out your aims, objectives and how you intend to achieve strategic growth. Your plan should cover every aspect of the business, including cashflow, market demand and trading operations, as well as the tax implications of expansion.

This can be a complex process but it’s vital to the successful growth of your business. If you decide you need a loan or investment to take you to the next level, your plan will need to persuade investors of your business’ potential and their likely returns.

We would always advise you to talk to an Independent Financial Adviser (IFA) like us, or your accountant when developing your business plan. They’ll be able to give you professional guidance on the areas it needs to cover, as well as advice on how to raise capital and structure your business for growth.

Look at the tax implications

VAT is a worrying subject for growing businesses, particularly if expansion changes their VAT standing. It’s a complex area, and how VAT applies to you can vary widely depending on the products or services you offer and the size of your business. The way you pay VAT may also be affected, as growing your business may take it over a particular threshold. For example, growing your income may mean you need to pay using standard VAT accounting rather than through the cash accounting VAT scheme.

Of course, business growth may also affect your ability to pay VAT on time, so you’ll need to take this into account when developing your business plan. The penalties for late payment could have a significant impact on the success of any growth plans. This is why it’s important to ask for advice from a professional accountant or IFA who understands the complexities. They will be able to offer a tailored service, from a full accounting and bookkeeping service to checking your books and accounts before you submit them.

What if I need funding – what are the options?

A loan from a financial institution

The most common way for businesses to gain the finance they need is a loan from a financial institution. This will be loaned for a set period of time, with a fixed rate of interest and the lender will usually ask for some sort of security, such as business assets, a personal guarantee, or in some cases, your own personal assets. By offering a form of collateral, the lender will recognise that you understand the financial risk involved and be more inclined to offer you loan options.

A loan from a director

If your business is a limited company, a director can make a loan to the company to support growth. This makes the director a creditor of the company and has the advantage that the company can pay the loan back in its own time. This benefits the director as they can charge interest on the loan and the repayments can be tax-free.

Business grants

The UK Government offers a number of business grants, which vary depending on the area you operate in and the nature of your business. Competition for these grants is fierce, the eligibility rules are strict, and the application process is rigorous and lengthy. They are allocated based on the company’s potential to benefit the UK economy. You can find out more at: www.gov.uk/guidance/innovation-apply-for-a-funding-award

Crowdfunding

This can be a useful way to attract lots of small investors to your business, although it can be more costly than other methods of gaining funding. In return for investment, investors receive a small share in the company.

Pension-led funding

You can borrow from a pension fund to invest in business growth, which can be an effective way to grow your pension pot. This is a complex process and we’d recommend that you get professional advice from an IFA or accountant on this approach.

Angel and/or Corporate Investors

An ‘Angel’ Investor – usually a high net worth individual – or a Corporate Investor may decide to invest in your business to help you expand. Usually, they will receive an agreed share in the company in return for their investment.

Protecting your business

One of the main areas that many entrepreneurs ignore as they grow their company is business protection. In fact, according to Legal & General, more than half of UK SMEs have no business protection in place to ensure business continuity. Yet, protection such as life assurance, critical illness cover and key person insurance could be vital if you rely on one or two employees and want to ensure the business can survive if they die or become critically ill.

These policies could help you to cover the cost of replacing employees, either permanently or temporarily, and compensate the business for any impact on contracts, sales or customer relationships. If your business is a limited company, you may be able to claim tax relief on some of these policies too, so it’s a good idea to speak to your accountant and tax office about this.

You can also protect all your employees with life or critical illness cover, with the benefits paid to the employee or their family. This is a benefit in kind, so the employee pays no tax or National Insurance on the premiums. Your business may also be able to claim against them as a business expense.

If you are considering any of these protection policies, you should talk to your accountant or IFA first, as they will be able to give you tailored advice on appropriate levels of cover and which policies are right for you.

Grosvenor Wealth Management can help you prepare for growth

There are many different issues to consider when you’re thinking about growing your business and working with trusted professional advisers can make the whole process smoother. Grosvenor work with you, your accountant and other advisers to understand your objectives and ambitions to help you carry out a full business audit, so you can plan for successful growth.

In June we ran 3 webinars with Rayner Essex aimed at business owners. If you would like to watch the recordings click the button below.

Webinar recording – Growing your business

At Grosvenor Wealth Management, we work with a number of new business owners, offering them support and advice tailored to their personal and professional needs. We also work closely with professional accountants to offer a fully rounded business service. If you would like an Adviser to get in touch, please contact us using this form.

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